Taxes fall without action by Holcomb, Republicans


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There was a moment a few weeks ago when it looked like Democrats might troll Republicans into rolling back Indiana’s gas tax. The tumbling gas prices since then have made it clear that would have been a shortsighted mistake.

Indiana’s sales tax on gas is falling on its own from a record 29.4 cents in August. The sales tax will drop from 24 cents per gallon in September to 22 cents per gallon in October thanks to a complex brew of geopolitical and economic circumstances contributing to a months-long decrease in gas prices.

As a quick catch-up: The “Indiana gas tax” is actually two taxes. There is a sales tax, which, like all sales taxes, fluctuates with actual prices, and there is an excise tax, which stays flat no matter what happens to prices. The excise tax rose by 1 cent to 33 cents per gallon in July as part of a phased-in hike that went into law in 2017.

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Earlier this year, when gas prices were soaring and front of mind, Democrats called for Indiana to suspend these taxes and make up for the loss in revenue by drawing down reserves. Gov. Eric Holcomb resisted the proposal, but Republicans considered at least pausing the 1-cent increase to the excise tax when the legislature started its special session in July.

As I wrote in May, Democrats had a decent instinct in terms of naked politics. They staked out the widely held position that gas prices were too high and the state should do something to lower them. That put pressure on the Republican majority to either acquiesce, which would have been a win, or do nothing, which also would have been a win. Republicans in other states, where political power is reversed, were playing a similar game.

But the prospect of a short-term political win does not justify taking a terrible policy position — and that’s what Democrats did. As the past few months have shown, gas prices go up and down for a lot of unpredictable reasons. Indiana does not have the leverage to manipulate energy markets and research has shown that gas tax holidays do not lead to dollar-to-dollar savings for consumers. In this case, the best solution, much like when you don’t care for the weather, was to just wait a while.

Beyond the basic reasons why suspending the gas tax would have been the wrong choice, Democrats played a dangerous long-term game, just as they did in 2017 when they opposed raising the gas tax on the nonsensical grounds that they didn’t like other tax cuts Republicans had passed.

Republicans who voted to raise the gas tax in 2017 are still facing substantial criticism from the right. But it was a responsible choice that has raised much-needed revenue to fund road projects. That has been especially important for Indianapolis, a city with a hopeless infrastructure backlog and little help from the state otherwise.

It’s not hard to imagine a scenario in which Republicans could have taken surging gas prices and Democrats’ mocking as an excuse to scale back the 2017 law that raised the gas tax. That would have hurt some of Democrats’ priorities.

Democrats have a legitimate concern that a gas tax is regressive. But, on the other hand, they don’t seem to mind that in states where they hold more political power. Maryland Democrats, for example, raised the state’s gas tax and tied perpetual increases to inflation in 2013 over the protests of aghast Republicans. Progressives generally want to raise revenue to pay for public services and they also like policies that discourage fuel consumption — which high gas prices theoretically can do. The difference in Indiana is that Democrats see the gas tax as an opportunity to score political points.

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It’s smart politics when you can take popular positions that differentiate you from your opponents. In this case, though, Democrats put forth a cynical gambit. Beyond the risk of tempting Republicans to back off their support for crucial transportation funding, Democrats also fed into the narrative that high gas prices were an emergency warranting government intervention.

It’s hard to believe that was just a couple months ago. Now, as Indiana gas prices sit at an average of $3.69, few people would argue that we are experiencing an emergency or that the Indiana General Assembly should have tapped the state’s savings to make gas a little cheaper.

It’s one thing for Democrats to argue that Indiana should make better use of its surplus by investing it in services. It’s another to propose setting that money on fire just to pander to the silly politics of gas prices.

Contact IndyStar metro columnist James Briggs at 317-444-6307. Follow him on Twitter: @JamesEBriggs.





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2022-09-25 02:04:36

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